Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Management of a firm with a cost of capital of 9 percent is considering a $110,000 investment with annual cash flow of $44,230 for three
Management of a firm with a cost of capital of 9 percent is considering a $110,000 investment with annual cash flow of $44,230 for three years. Use Appendix A and Appendix D to answer the questions. a. What are the investment's net present value and internal rate of return? Use a minus sign to enter a negative value, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the nearest whole number. NPV: $ IRR: % b. The internal rate of return assumes that each cash flow is reinvested at the internal rate of return. If that reinvestment rate is achieved, what is the total value of the cash flows at the end of the third year? Use the rounded internal rate of return from part a. Round your answer to the nearest dollar. $ C. The net present value technique assumes that each cash flow is reinvested at the firm's cost of capital. What would be the total value of the cash flows at the end of the third year, if the funds are reinvested at the firm's cost of capital? Round your answer to the nearest dollar. $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started